Take Two rejects EA offer

In a statement released earlier today, Take-Two announced that it would be rejecting EA's takeover offer of $26 per share, which amounts to a $2 billion valuation for the publisher. The board of directors has instructed its stockholders not to tender their shares at this price.

"Our Board, after careful review, has unanimously determined that Electronic Arts' offer continues to provide insufficient value and remains opportunistically timed to capture the value of the upcoming Grand Theft Auto IV launch at the expense of our stockholders," said Strauss Zelnick, Chairman of the Board of Take-Two. The press release implies that the board will be willing to consider, "alternatives to maximize stockholder value", which may or may not include, "a business combination of the Company with third parties or with EA, remaining independent, or other strategic or financial alternatives, that could deliver higher stockholder value than the EA Offer." However, it will only engage in informal discussions until GTA IV has been released.

Nevertheless, the willingness to open channels of communication, together with several tactic allusions to other interested parties, suggests that Take-Two is attempting to manouvere itself into a stronger position for a still possible buyout. "They're publicly bargaining,'' said Kaufman Brothers analyst Todd Mitchell to Bloomberg. "They're trying to flush out a higher offer.''

The press release presents robust and verbose defense of the board's decision- hardly surprising considering the legal action instigated earlier this month by shareholder Patrick Solomon who alleged Take-Two's rejection of EA's bid was not in the best interests of shareholder value. However, it's a gamble: EA may well withdraw its offer, or field a reduced bid at a later date. Industry analyst Michael Pachter of Wedbush Morgan has referred to the decision as a mistake: "We believe that the company was positioned to extract a higher offer from EA by offering a friendly transaction, and its Board chose to continue its adversarial posture." (More here.)

The question is, who are the other suitors mentioned in Take-Two's release? Vivendi has been touted, but this seems unlikely. Could a large mainstream media giant be about to step in?